As tax fraud increases, IRS can’t keep up

With tax season in full swing, putting an incorrect number on your tax returns — a higher number that is — probably won’t be caught by the IRS.

The Ledger reports that because the Internal Revenue Service is so busy processing returns and handing out cash, it typically doesn’t have much time to investigate whether the amount written on a tax return is the actual amount a person should be getting back.

For example, actor Wesley Snipes claimed a refund of $7.3 million. Sound off? It probably is, but the IRS seemingly works in reverse: issue refund now, ask questions later. It works out well for Snipes, but leaves the government vulnerable to fraud.

Another example is 22-year-old Micah Lashawn Alexander, who is suspected of collecting tax refunds for dead people. Her ex-boyfriend told police she would get Social Security numbers from genealogy websites, resulting in almost $20,000 in phony refunds.

The IRS did not discover her fraudulent activity. Local authorities put her in jail for just five months.

While the agency does not know the exact amount of money that has been lost due to fraud, the Treasury Department’s inspector general for tax administration, J. Russell George, said members of Congress estimate “billions.”

Unfortunately for the IRS, and for honest taxpayers, once the money is gone, it’s gone.

James R. White, director of strategic issues at the Government Accountability Office, said, “It’s hard to get money back once it’s out the door.”

The Department of Justice takes few identity-related cases to court, and none under $100,000. With the recent increase in tax fraud, the IRS is upping its security measures.

Deputy Chief Miller said his agency stopped 215,000 questionable returns this year and the IRS is putting codes on the accounts of deceased people that have already been victim to illegal refunds to stop it from happening again.